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Author: | Davidson, C. Segerstrom, P. |
Title: | R&D subsidies and economic growth |
Journal: | RAND Journal of Economics
1998 : AUTUMN, VOL. 29:3, p. 548-577 |
Index terms: | R&D SUBSIDIES GROWTH |
Language: | eng |
Abstract: | The authors present an endogenous growth model in which some firms devote resources to developing higher-quality products (innovative R&D). Although consumers benefit from the knowledge created by both types of R&D activities, only innovative R&D subsidies lead to faster economic growth; imitative R&D subsidies actually lead to faster economic growth. A key assumption driving these conclusions is that R&D activities are subject to decreasing returns. When R&D activities are subject to constant returns, as is commonly assumed, the only equilibrium with both innovation and imitation is unstable. |
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